Merge Technologies Announces First Quarter 2002 Results. Company achieves financial goals; enters new phase of product development; positions for long-term growth with pending acquisition of eFilm Medical Inc.
Milwaukee, WI, April 25, 2002

Merge Technologies Incorporated (Nasdaq:MRGE) today announced financial results for the quarter ended March 31, 2002.

Revenues for the quarter were $4,535,000, an increase of 36% over revenues of $3,344,000 for the quarter ended March 31, 2001. Net income for the quarter ended March 31, 2002 was $704,000, generating $0.09 basic EPS and $0.07 diluted EPS compared to a net loss of $82,000 and basic and diluted EPS of $(0.02) for the quarter ended March 31, 2001.

Gross profit increased to 68% in the quarter ended March 31, 2002 from 65% for the quarter ended March 31, 2001. Operating expenses for the quarter ended March 31, 2002 were $2,368,000 compared to $2,302,000 for the quarter ended March 31, 2001, an increase of 3%. While operating expenses year-over-year were comparable, expenses for sales, marketing and professional service increased $233,000 in the quarter ended March 31, 2002 to $1,223,000 from $990,000 in the quarter ended March 31, 2001. The increase is consistent with the Company's focus on investing in areas key to its growth plans.
The Company's current ratio at March 31, 2002 was 2.29 compared to a current ratio of 2.18 at December 31, 2001. Cash at March 31, 2002 increased 35% to $1,407,000 from $1,043,000 at December 31, 2001. The Company had no outstanding balance on its $3 million bank line of credit at March 31, 2002.

Analysis of Results:
"I am pleased to report we have started 2002 by achieving our first quarter financial targets and posting our sixth consecutive quarter of improved operating results," said Richard A. Linden, President and CEO. "These positive results reflect a continued focus on operational excellence, accelerated product innovation and increased investments in sales, marketing and professional service.

"Equally important as our financial results was the Company's continued success with the installation of PACSbuilder™ solutions for new customers. Our PACSbuilder radiology workflow solution, in combination with our professional service, delivers a completely digital and filmless environment to our customers. We are realizing a steady growth in radiological procedures captured, stored, read and distributed digitally by Merge workflow solutions."
During the first quarter the Company successfully launched MergeNet™, the latest in a series of modular radiology workflow software applications. MergeNet provides referring physicians secure on-line access to radiology images and reports. MergeNet is a browser-based application that combines radiology reports with associated images and delivers them over the Web using Merge's ImageChannel™ wavelet streaming technology. "We continue to deliver on our product innovation model designed to launch new component software products every three to four months and fully expect to maintain that level of new product introduction going forward," said Linden.

Throughout the first quarter the Company successfully deployed a portion of working capital raised in 2001 on initiatives designed to generate revenue and provide a foundation for steady growth. The Company invested in an enhanced testing and simulation lab designed to showcase its integrated workflow solutions to customers during visits to its corporate office. Additionally, key product innovation efforts were accelerated and expanded in scope, which will result in several new and enhanced product announcements in the second quarter.

The Company recently announced a definitive agreement to acquire eFilm Medical Inc. Commenting on the eFilm transaction, Linden said, "The acquisition of eFilm represents an important strategic investment for Merge designed to increase the long-term value of the Company. eFilm will accelerate our presence in the radiology workflow market, expand our product offering and increase our visibility to the healthcare clinician, especially the radiologist. Merge brings expertise and market presence with integration, image server platforms, and backend connectivity technologies. eFilm brings expertise and extensive market presence with image visualization front-end software applications for the clinician and multi-year professional service contracts with several Toronto hospitals where eFilm's solutions have delivered a completely filmless environment. Together we can accelerate progress on our shared vision and deliver greater value to our combined customer base."

Guidance:
The Company expects to continue its organic revenue growth trajectory of year-over-year quarterly growth of approximately 30%. It anticipates a nominal increase in operating expenses consistent with its financial plan due to an increase in sales, marketing and professional service resources.

The Company expects to complete the eFilm acquisition in the mid-June to early July timeframe, subject to certain closing conditions. Excluding the financial impact of non-cash charges related to the transaction, the Company reiterates its guidance of $21 - $22 million in revenue, generating $0.31 - $0.34 diluted EPS for 2002. The acquisition of eFilm is a strategic investment, which the Company expects to be accretive to earnings per share in 2003 and beyond. The Company anticipates issuing further guidance for the remainder of 2002 and 2003 once the transaction closes.

Click Here For Quarter 1, 2002 Statement of Operations and Summary Balance Sheet Data (84kb PDF)

You will need Acrobat Reader to view special items on this page. If you have not installed this free software on your computer, it can be downloaded directly from the Adobe website. You may need the Powerpoint Viewer to view some presentations. If you don't have Powerpoint, click here to download the Powerpoint viewer for Windows.

Press Contact
Attn: Beth Frost-Johnson Merge Healthcare 6737 West Washington St. Suite 2250 Milwaukee, WI 53214		Phone: 1-(414) 977-4254
Email Address: marketing@merge.com
Except for the historical information herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. When used in this press release, the words “will,” “believes,” “intends,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those expressed in, or implied by, the forward-looking statements based on a number of factors, including, but not limited to, the uncertainty created by, the adverse impact on relationships with customers, potential customers, suppliers and investors potentially resulting from, and other risks associated with, the changes in the Company’s senior management; costs, risks and effects of the investigation by the Audit Committee of the Board of Directors; the impact of the restatement of financial statements of the Company and other actions that may be taken or required as a result of such restatement; the Company's inability to timely file reports with the Securities and Exchange Commission; risks associated with the Company's inability to meet the requirements of The NASDAQ Stock Market for continued listing, including possible delisting; costs, risks and effects of legal proceedings and investigations, including the informal, non-public inquiry being conducted by the Securities and Exchange Commission and class action, derivative, and other lawsuits; risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, ability to integrate acquisitions, changing economic conditions, credit and payment risks associated with end-user sales, dependence on major customers, dependence on key personnel, and other risk factors detailed in the Company’s filings with the Securities and Exchange Commission. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason.